The number of retailers in England and Wales going into administration in 2011 rose 11%, from 165 in 2010 to 183 – and there are warnings that still more will fail in the months ahead.
The business advisory firm Deloitte, which released the figures today, also revealed that despite the last quarter including the lucrative Christmas period, administrations nevertheless increased by 27% on the previous quarter, with a total of 42 retailers falling into administration compared with 33 in Q3 2011.
Lee Manning, restructuring services partner at Deloitte, commented: “2011 was a tough year for retailers, and unfortunately this trend is set to continue well into 2012. Many retailers would have been banking on the busy Christmas period to give them a much-needed sales uplift, but retailers were forced into discounting at levels last seen in the aftermath of the collapse of Lehman Brothers, putting severe pressure on margins.
“We’re likely to see a further spike in retail administrations in Q1 2012 as retailers buckle under the pressure of VAT payments falling due, impending rent payments, the increased popularity of shopping online and the traditional decline in footfall as the attractive year-end sale offers come to an end.”
He went on: “What stands out in 2011 is the significant increase in household-name retailers that have gone into administration including: Barratts, Oddbins, Jane Norman, TJ Hughes, Habitat and Homeform. Collectively, the plight of these companies shows the depth of the impact of the consumer recession.”
Deloitte says that one in five households has seen a reduction in income and that consumers are cutting back across all discretionary spending categories. Twenty-eight per cent are spending less on homewares and furniture.
Reacting to the figures, the British Retail Consortium said it agreed that more administrations were likely in the coming months, particularly with business rates due to rise by 5.6% in April.
Director general Stephen Robertson said that 2011 had provided “virtually no real-terms growth for retailers. In such a competitive sector there will always be businesses that do well while others struggle, but seeing such a high number of failures in the final quarter of the year is particularly alarming.”
He called on government to support retailers by holding down the costs of business rates and retail levies and the burden of regulation.
“Retailers don’t ask for hand-outs but they do deserve help overcoming some of the barriers to business success,” he said. “Retail failures leave gaps on our high streets and can result in thousands of job losses.”